European VC firm Speedinvest has raised €30m for its first continuation vehicle, with another €30m vehicle to be closed in the coming weeks.
Continuation funds allow VCs to keep hold of their mature companies for longer with the hope of making bigger returns further down the line. They also provide a route for LPs to cash out. Last week, Revolut and Spotify-backer Lakestar raised a $265m continuation fund, among Europe’s largest to date.
Speedinvest’s first €30m continuation fund is anchored by existing LP British fund-of-funds Molten Ventures, with support from new investor Acurio Ventures — a Spanish VC which has previously invested in firms such as Hoxton Ventures and Firstminute Capital through its fund-of-funds.
The firm declined to name the five portfolio companies whose holdings will be partially transferred to the two continuation vehicles. It said the companies are primarily from Speedinvest’s 2015 vintage, which includes companies like GoStudent, Wefox, Refurbed, Inkitt and Upvest.
Oliver Holle, cofounder and managing partner at Speedinvest, says the firm chose to raise two separate vehicles rather than one large fund as smaller, tailored vehicles allow for “greater flexibility and nimbleness.”
The firm plans to roll out several continuation funds over the next few years.
“By structuring multiple vehicles, we can cater to the different tastes and strategies of multiple secondary funds,” adds Holle.
Liquidity, please
The “VC job description” is no longer just about finding deals, but about providing liquidity to LPs, says Holle. The slowing of IPOs and M&A activity in the last few years has put pressure on VCs to find new ways to return capital.
“Proactively creating secondary transactions in your portfolio will be part of any successful VC mandate, especially when you invest in the early stages, because we still need to attract institutional capital. We need to keep our LPs happy and they need to see returns that are not taking 14-15 years to materialise,” he says.
Holle adds that continuation funds can turn good, but lesser-known companies into an attractive investment product for investors.
“We need to get transactions done for companies that are really meaningful, that have meaningful revenues, that are growing, but are not household names, and that’s where continuation funds can become an important part of the toolkit, because we are creating bundles that in aggregate are very interesting for potential strategic buyers,” he says.
Speedinvest’s first continuation fund will aim to return approximately 3-4x of the money invested to its LPs.
The firm last raised a fund in 2022: €300m for its fourth pre-seed and seed stage fund and €200m to invest into its existing portfolio of 400 companies. Speedinvest is currently raising a seed fund and a growth fund and is targeting a higher volume than its previous vintage.
“In Europe, there’s plenty of appetite to invest more in growth and that’s where we also see an opportunity,” says Holle.
